Frank's Internet Gambling Bill H.R. 2267 Stresses Consumer Protection

Rep. Barney Frank (D-MA), chairman of the House Financial Services Committee on Wednesday introduced H.R. 2267, the Internet Gambling Regulation, Consumer Protection, and Enforcement Act of 2009, to establish a licensing, regulatory, and taxation framework to allow licensed online poker and Internet gambling operators to accept bets and wagers from individuals in the United States. Such licensed operators would be exempt from the 2006 Unlawful Internet Gambling Enforcement Act (UIGEA).

"The government should not interfere with people's liberty unless there is a good reason," Frank said. "This is, I believe, the single biggest example of an intrusion into the principle that people should be free to do things on the Internet. It's clearly the case that gambling is an activity that can be done offline but not online."

Frank said the bill would give the U.S. Treasury Department the authority to establish regulations and license Internet gambling operators for terms of five years, renewable conditional on good conduct and efficiency. The Treasury would also have the authority to revoke the license of any operator that violates the law, or does not comply with its requirements. The Secretary for the Treasury may call on the US Attorney General for enforcement and compliance issues, including the issuing of fines and jail terms. Terms of imprisonment of up to five years are provided for under the Act.

To see the text of H.R. 2267, the Internet Gambling Regulation, Consumer Protection, and Enforcement Act, click here.

Representative McDermott is also expected to re-introduce companion legislation aimed at collecting taxes owed on regulated Internet gambling activities from individuals and corporations.

Sports betting or any wager that would be considered a violation of the Professional and Amateur Sports Protection Act (PASPA) is not allowed under Frank's legislation. However, fantasy sports and other "simulation games" are exempted.

CONSUMER PROTECTION STRESSED

Opponents argue that legalized online gambling is a "clear danger to our youth" and encourages gambling addiction at a young age, citing studies that "have shown that the earlier one begins gambling, the more likely it is he or she will become a compulsive problem gambler."

"The notion that a society should prohibit something entirely because of the possibility that children will abuse it is a terrible blow to liberty," Frank said.

These concerns have been brought up during markup hearings of past internet gambling bills. Frank stressed that this bill includes safeguards to prevent underage or compulsive gambling and other illegal activity, to protect consumers who gamble online. To further emphasize this point, the name of the bill, unlike former versions, now includes 'Consumer Protection' in its name. The bill also calls for the establishment of a "program to alert the public to the existence, consequences, and availability of the self-exclusion list, and shall prepare and promulgate written materials to be used in such a program."

The bill states, "Internet gambling in the United States should be controlled by a strict Federal licensing and regulatory framework to protect underage and otherwise vulnerable individuals, to ensure the games are fair, to address the concerns of law enforcement, and to enforce any limitations on the activity established by the States and Indian tribes."

Among the safeguards in the bill is that any Internet gambling operator would be required to: ensure an individual placing a bet is of legal age (as defined by the law in the state or tribal area) and physically located in that jurisdiction, combats compulsive Internet gambling and money laundering, and protects privacy.

License applicants may be asked to provide credit histories, comprehensive financial statements, an outline of the corporation's structure, criminal records, and their methodologies to combat underage, compulsive, and problem gambling. Licensees must also protect against "fraud, money laundering, and terrorist finance."

DELAY FOR UIGEA COMPLIANCE

On Wednesday, Frank also introduced a separate piece of legislation, called the Reasonable Prudence in Regulation Act, requiring compliance to UIGEA regulations one year later than the December 1, 2009 date currently scheduled. Frank noted that UIGEA regulations were approved in November as midnight rules and implemented on January 19th, one day prior to U.S. President Barack Obama taking office.

As stated on the House Financial Services Committee website: "The legislation will stop Federal regulators from enforcing the UIGEA until Congress has had a chance to decide national policy." This provides time for the Internet Gambling Regulation bill to make its journey through Congress, and give operators some time to apply.

SUPPORT FOR FRANK'S BILL

The Poker Players Alliance, chaired by former New York Sen. Alfonse D'Amato, showed their support in a press release issued Wednesday. In it D'Amato says, "Online poker is a legal, thriving industry and poker players deserve the consumer protections and the freedom to play that are provided for in this legislation. We are grateful for Chairman Frank's leadership and will be activating our grassroots army made up of over one million members to help him drive legislation." The PPA has announced they plan to spend $3 million to lobby Congress during the current session.

Michael Brodsky, head of Youbet.com, an online gambling Web site, also praised the bill, saying, "Banning Internet gambling has the same effect as the ban on alcohol had during Prohibition," Brodsky said. "It merely drives the activity underground, forgoes massive tax revenues and makes criminals out of otherwise law-abiding citizens.

"Chairman Frank's bill realities and would bring this underground activity into the light," he added.

Jeffrey Sandman, spokesperson for the Safe and Secure Internet Gambling Initiative said: "We applaud [Financial Services Committee] Chairman Frank's strong leadership to advance a common sense approach to regulate Internet gambling and reverse the intrusive, ineffective and burdensome prohibition."

Harrah's Entertainment's senior vice president of communications and government relationsm Jan Jones said, "We really believe this industry already exists. It just exists in a wild west setting. If you say you care about protecting children and fraud and money laundering, then the only way you can put those protections in place is to put in a strong regulatory frame."

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